Indonesia’s ambitious plan to phase out coal power plants within 15 years faces significant challenges, experts warn. Achieving this goal requires a major policy shift and substantial investment in renewable energy infrastructure, especially in one of the world’s largest carbon-emitting countries.
In November, President Prabowo Subianto pledged to retire coal plants and build over 75 gigawatts of renewable energy capacity by 2040. He also committed to achieving net-zero emissions by 2050, setting a target 10 years earlier than his predecessor, Joko Widodo.
Experts caution that these goals are ambitious for a country that generates about 66% of its electricity from coal, continues to build new coal plants, and has a history of struggling to meet climate targets. Furthermore, Indonesia depends on affordable coal power for its nickel processing sector, which plays a crucial role in the global stainless steel and electric vehicle supply chains.
Energy experts, including the International Energy Agency (IEA), told the Financial Times that achieving these goals will require extensive reforms. They suggest ending policies that favor fossil fuels, prioritizing the construction of clean energy infrastructure, and reducing coal dependency in key industries.
Indonesia’s energy sector emitted approximately 650 million tonnes of carbon dioxide in 2022, making it the seventh-largest carbon emitter globally, according to IEA data.
“It is technically and financially feasible, but the key is that there are many reforms needed,” said Fabby Tumiwa, executive director of the Institute for Essential Services Reform, a Jakarta-based think tank.
Tumiwa estimates Indonesia needs at least $1.2 trillion in investment by 2050 for clean energy, storage, and transmission networks, on top of an estimated $28 billion to retire coal plants early. In 2023, Indonesia’s renewable energy sector saw investments of only $1.5 billion.
To meet Prabowo’s target of retiring coal by 2040, Indonesia must build 8 gigawatts (GW) of renewable energy annually while retiring 3GW of coal each year, according to energy think tank Ember. Between 2018 and 2023, the country only added 3.3GW of renewable power.
Renewable energy contributed just 13% of Indonesia’s total power mix in 2023, according to government data, while coal provided 40%. Jakarta’s target is to reach 23% renewables by 2025, but analysts believe this goal will be difficult to achieve with the current pace of development.
One of the biggest obstacles, experts say, is the uneven playing field for renewables. Indonesia has set a price ceiling for coal used in power plants, making it much cheaper than alternatives. Meanwhile, renewable energy producers are required to sell to the state-run electricity utility, Perusahaan Listrik Negara, at rates that experts argue make clean energy investments unattractive. There are also restrictive rules on ownership and procurement for renewable projects.
“The key is to make renewable energy investments more attractive,” Tumiwa said.
The IEA has urged Indonesia to phase out fossil fuel subsidies, including price caps on coal, to accelerate the development of renewables.
Eniya Listiani Dewi, Indonesia’s director-general of new and renewable energy at the energy ministry, acknowledged the challenge of meeting Prabowo’s targets. However, she assured that the government is working to facilitate private sector investment in the renewable energy sector.
Indonesia’s energy transition also suffers from a lack of external financing. In 2022, a group of developed nations, led by the U.S. and Japan, pledged nearly $22 billion to support Indonesia’s coal transition. However, only a small portion of this funding has been released.
Additionally, Indonesia needs significant investments in transmission lines and storage infrastructure to ensure a reliable supply of clean energy. Some of the country’s renewable resources, like geothermal, wind, hydro, and solar power, are located far from Java, where 55% of the population resides.
Indonesia’s coal capacity has continued to grow, doubling since the country signed the Paris Climate Agreement in 2016. In 2024, Indonesia’s coal production reached a record 831 million tonnes, driven largely by rapid growth in nickel processing. In 2020, the government banned nickel ore exports to force companies to invest in onshore processing, and it has made exceptions to the ban on new coal plants for industries such as mining.
Fitch, a rating agency, highlighted Indonesia’s weak track record in meeting energy transition commitments. The agency warned that Prabowo’s goals will face significant hurdles and could undermine the country’s energy security.
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